Demand for industrial and commercial infrastructure is growing, and the global real estate market is developing with it, too. Its revenue is predicted to increase by about 5% and reach $14.6 billion by 2030.
To accelerate deals and maximize value, real estate firms use virtual data rooms — a secure and user-friendly tool for storing and sharing confidential information.
- -What is a real estate data room?
- -Solutions that VDRs offer for the real estate industry
- -4 top benefits of a virtual data room for real estate
- -What real estate professionals need a virtual data room?
- -Documents to store in a real estate data room
- -Important VDR features for real estate project management
- -How to start using a real estate data room
- -Residential and commercial real estate management
- -Key takeaways
What is a real estate data room?
A commercial real estate virtual data room is a safe, cloud-based digital repository used for confidential data storage, secure file sharing, due diligence, and collaboration during real estate deals.
Thanks to a virtual data room, buyers and real estate specialists like sellers, property managers, investors, and advisors can access and manage documents remotely and absolutely securely from anywhere. In such a way, real estate projects are completed faster and more efficiently.
Cost reduction, ease of use, security, 24/7 access, and efficient document management tools are the main reasons why so many real estate firms use virtual data rooms today.
What are the other benefits of using VDRs? What documents can be stored there? What real estate specialists can benefit from data rooms? How to find the best provider? Find the answers in the guide below.
Solutions that VDRs offer for the real estate industry
VDR software for real estate significantly eases and facilities deal management. Here are the solutions it provides:
- Secure data storage. Store confidential documents with confidence, organize them conveniently in folders, and grant access easily to the relevant parties.
- Files sharing. Share large volumes of data quickly and effortlessly with partners and customers without worrying about data leaks.
- Real estate due diligence. Organize and maintain all due diligence documents in order, provide access to them for as many people as you need, and stay compliant with all due diligence regulations not to pay the fines.
- Real estate project management. Track multiple projects simultaneously, facilitate sales and purchases, and manage due diligence, investment sales, and joint ventures securely and efficiently.
- Project documentation management. Upload and structure real estate documents in a few clicks with drag-n-drop, bulk upload, and automatic indexing tools.
- Portfolio management. Carry out investment activities, exchange information with partners and investors, and make strategic decisions to diversify investment risks.
- Asset management. Store all financial documents in one safe place to manage the company’s assets more efficiently and securely. Share them with asset and property managers, so they can review and track finances in real-time.
4 top benefits of a virtual data room for real estate
Here’s how sellers, buyers, and investors can benefit from a real estate investment data room.
1. High level of security
Commercial real estate firms deal with sensitive information and financial matters regularly. That’s why security is their top concern when it comes to storing and sharing data using third-party services.
With that in mind, virtual data room providers offer advanced security features that protect confidential files from unauthorized access. Among the tools are two-factor authentication, strong encryption methods, and digital watermarking.
2. Increased efficiency
Complex real estate transactions and a due diligence process typically involve a lot of paperwork performed by numerous parties. To make it all less time and resource-consuming, virtual data rooms provide users with convenient tools.
Among the features that make the real estate deal processes more efficient are bulk upload, automatic index numbering, notifications, integrations, and full-text search. Additionally, users can manage many projects in one place, which saves a lot of time.
3. Easy access
It used to take a lot of time to access real estate documents as they were stored in physical data rooms. Besides, the involved parties had to meet in person to share data and discuss deal details.
Everything has changed due to virtual data rooms. Now, authorized data room members can access information anywhere, anytime, and through any device. Additionally, they can review documents simultaneously, make edits, download, and print files.
4. Fast communication
Ineffective communication channels complicate the processes and hinder effective decision-making. To improve collaboration, there should be a centralized solution used by all deal stakeholders.
That’s why real estate specialists leverage data rooms that have advanced communication tools. Users can collaborate on multiple projects with the help of live discussions, threads, comments, reports, and video conferencing.
What real estate professionals need a virtual data room?
Let’s see who exactly can benefit from using a virtual data room real estate solution.
- Brokers. Real estate brokers use a data room to write and share contracts and to negotiate and arrange real estate transactions.
- Investors. Individual and institutional investors often participate in several real estate transactions at a time. They need a VDR to review files, negotiate deals, and collaborate with other experts.
- Advisors. Advisors research properties offered for sale, evaluate acquisitions, and develop strategies for operational improvements. They do it to help investors maximize their real estate investments and need a VDR mainly for file sharing and communication.
- Asset managers. Asset managers use the VDR software for tracking the funds and financial documents to successfully allocate and manage investments.
- Buyers. Potential buyers need a data room to review the documentation and to check images and videos of the property they want to purchase. It helps to make a decision easier and faster.
- Lawyers. Lawyers gain access to specific documents through a virtual data room. In such a way, they can check and make sure that all selling and buying processes go well.
Documents to store in a real estate data room
A data room real estate solution lets users store due diligence documents and other confidential information without worrying about data breaches, leaks, and thefts. Here are the examples of documents VDR subscribers usually upload and share:
- Construction documents. They include contract forms, conditions of the contract, engineering plans, and drawings. Buyers, auditors, and investors usually need access to these documents.
- Zoning documents. These are drawings showing compliance with the zoning code. They should be shared with the authority that has jurisdiction over the property.
- Acquisition documents. They comprise such details as date, parties, conditions, agreement to sell and purchase, price, buyer protection, and schedules.
- Commercial lease agreements. These agreements are required when a commercial property is rented. They outline a landlord’s and tenant’s rights and obligations.
- Financial documents. They contain income and expense statements, audited financial statements, utility bills, tax documents, property liens, and general ledgers.
- Legal documents. They include intent to purchase real estate letters, bills of sale, quitclaim deeds, real estate agent agreements, and other regulatory documents.
- Real estate portfolios. They play the role of investors’ resumes and show a collection of past and present real estate investment assets.
- Investment or asset portfolios. These documents illustrate financial assets that an investor owns. They may include bonds, stocks, currencies, cash, or cash equivalents.
Important VDR features for real estate project management
Let’s examine what features a virtual data room should have for successful real estate management.
Document management features
- Bulk upload. Upload large volumes of data simultaneously to save time.
- Drag-n-drop. Grab a file located on your computer and drag it to the data room easily and quickly.
- Multi-format support. Upload documents in any format without having to convert them.
- Automatic index numbering. Upload files and folders and have them automatically numbered. It helps to make the data room well-organized and to look for documents effortlessly.
Document security features
- Dynamic watermarking. Control who and when viewed, edited, or downloaded the files with the help of watermarks — an image that overlays a file and shows a username and a date.
- Remote shred. Adjust access permissions, and manage and delete documents even after they have been downloaded to a user’s device.
- Fence view. Protect confidential data against unsolicited viewing using the fence view feature. This is a barred screen area that prevents screen printing and screen capture.
Access security features
- Two-factor authentication (2FA). Access the data room by providing a password and a code sent to your phone. It adds an extra layer of security to the authentication process.
- User permissions. Provide access to users according to their roles and responsibilities. For example, admins can apply restrictions on viewing, editing, downloading, and printing or set expiration dates for file access.
- Time and IP access restriction. Limit users’ access to the data room from particular IP addresses or during specific time slots.
Real estate visual tours
- Live video tours. Start live video tours and show potential buyers or investors a detailed tour of the property they’re interested in. They don’t need to travel anywhere and can enjoy the tour in the comfort of their homes or offices.
- Video presentation attachments. Record and attach a property video tour to other documents in the data room. When administrators adjust access, authorized users can watch it when it’s convenient for them.
- Chats. Get in touch with any data room user via a group chat or private conversation to discuss project tasks and facilitate decision-making.
- Video conferencing. Call partners, investors, or buyers via a video conferencing tool that many VDR providers offer to their customers.
- Comments. Leave comments and discuss questions related to a particular document in a virtual data room.
- User activity tracking. See each user’s action and track document views, prints, and downloads in a virtual data room.
- Question status. Be in control of project questions by giving them status and receiving notifications when it’s changed.
- Audit trails. Collect analytics based on audit trails that record every action in the data room. Being aware of who viewed the files and for how long helps to determine the most interested investors and buyers. It also lets you know what documents are of the most value.
- Branded user interface. Upload your company’s logo and adjust theme colors to create a personalized solution and promote your brand.
- Customizable headers and footers. Customize documents’ headers and footers to improve brand recognition, add credibility, and create a standardized look and feel.
- Customizable NDA. Specify your own terms and conditions which data room guests should agree to before accessing the documents.
How to start using a real estate data room
Here’s a short data room set up guide to learn what steps to take when choosing a VDR provider for real estate projects.
1. Select the best VDR solution
How to choose the most appropriate option among numerous data room providers? Follow the next tips:
- Define your requirements. Think what exactly you expect a data room to be capable of.
- Evaluate the data room. Consider such criteria as level of security, set of features, pricing, provider’s reputation, storage volume, and user number.
- Test the data room. Contact the support team to book a demo or use a free trial period to test the platform yourself.
2. Create and organize a data room
Once you’ve chosen the most suitable provider for your needs, start organizing the data room:
- Prepare the documents. Create a checklist to prepare all documents required for the real estate due diligence process.
- Determine the data room structure. Categorize and order the files and folders in the data room so that all parties can quickly find and access them.
3. Add users
To add new data room users, do the following:
- Email invitations. Invite the authorized users to the data room via email. Use the bulk invitation feature to make the process easier.
- Adjust access settings. Configure who of users can view, edit, download, and print documents.
4. Upload files
Once security settings are adjusted, confidential information can be added to the data room.
- Use document management features. Upload files quickly and easily with the help of the bulk upload and drag-n-drop features.
- Apply consistent filing nomenclature. Rename documents that have unclear names like dates or numbers, so all users understand what information each file contains.
- Revise and update documents. Make sure admins regularly check if the data room contains correct documents.
Residential and commercial real estate management
There are basically two types of real estate property:
- Residential. It includes residential properties like single-family homes, apartments, condominiums, and townhouses.
- Commercial. It includes buildings used for businesses such as shopping malls, office buildings, warehouses, parking lots, industrial units, medical centers, and hotels.
Residential real estate (RRE) generates profit through rental income. Commercial real estate (CRE) is more profitable as it gains capital from sales, leases, and rentals.
CRE deals are usually more challenging because:
- They’re much more complex and time-consuming.
- They involve many people.
- CRE property buyers are less protected legally.
- The CRE due diligence process takes more time and effort.
A commercial real estate data room turns out to be the best solution to cope with those challenges.
Here are the key points from the guide to know about using a real estate data room:
- There are two types of real estate property — residential and commercial. Commercial real estate deals are much more complex, time-consuming, and involve many people. VDRs are usually used for commercial real estate projects.
- Cost reduction, ease of use, security, 24/7 access, and efficient document management tools are the main reasons for using a real estate data room.
- A high level of security, increased efficiency, easy access, and fast communication are the major VDR benefits.
- Brokers, investors, advisors, asset managers, buyers, and lawyers use real estate data rooms the most.
- Real estate portfolios, commercial lease agreements, construction, zoning, acquisition, financial, and legal documents are usually stored in the real estate data room.
- Bulk upload, automatic index numbering, dynamic watermarking, remote shred, two-factor authentication, user permissions, real estate visual tours, and reporting features are among the most important for a real estate data room.
- To choose the best data room provider, consider such criteria as level of security, set of features, pricing, provider’s reputation, storage volume, and user number.